Xerox expects new products to boost sales

Xerox Corp. is set to launch new products and refresh others next month that will target the small and midsize business markets. It is a move company leaders expect will boost revenue from equipment sales this year.

Ursula Burns, chairman and CEO, said the company's new offerings will include software and services related to the products and are expected to affect its document outsourcing business.

"I think that it will be a reasonable year, and we are positioned well against the competition," Burns said during a conference call last week to discuss Xerox's fourth-quarter and year-end financial results.

On Jan. 24, Xerox reported net income of $335 million, or 26 cents a diluted share, down from a profit of $375 million, or 26 cents a diluted share, a year ago. The most recent quarter's adjusted earnings were 30 cents a share and included 5 cents of restructuring charges. The adjusted earnings per share exclude 4 cents related to special items.

Sales were $5.92 billion, down 1 percent from $5.96 billion a year ago.

Analysts polled by Thomson Reuters had expected fourth-quarter earnings per share of 29 cents on sales of $5.88 billion.

Burns said growth from services and profitability from its document technology business had a positive impact on the results.

Revenue from the company's services business was up 7 percent and represented 52 percent of total revenue. Services revenue totaled some $3.1 billion, up from $2.7 billion.

Document technology sales were $2.5 billion, down 8 percent from $2.9 billion a year ago but representing 42 percent of the company's sales during the quarter. The drop was due to continued economic and market conditions that put pressure on sales of document systems, supplies and related service, Xerox said.

The company generated $1.8 billion in cash from operations during the fourth quarter, including $269 million net cash from the sale of certain finance receivables.

For the year, Xerox reported net income of $1.2 billion, or 88 cents a share, versus $1.3 billion, or 90 cents a share, a year ago. Sales were $22.4 billion, down 1 percent from $22.6 billion. The company reported adjusted earnings of $1.03 a share. Analysts had expected earnings per share of $1.03 on sales of $22.35 billion.

Operating cash flow was $2.6 billion, up $600 million from full-year 2011.

Analyst Shannon Cross of Cross Research LLC wrote in a research note that the upcoming technology product launches should drive market gains and provide operating margin support.

"We think the company is very well positioned into 2013," she wrote.

Benjamin Reitzes, an analyst with Barclays Capital Inc., stated in a research note that the company's performance could improve later in the year. The biggest issues Xerox stock faces include margin pressure, secular risks for copiers and overall cash flow issues.

This week Xerox was upgraded to an outperform rating from market perform by BMO Capital Markets, the investment and corporate banking arm of BMO Financial Group. Analysts there cited positive year-over-year growth in revenue and improving operating margins that could lead to expansion in 2013.

Shares of Xerox (NYSE:XR) were trading at midweek around $8.20, on the high end of a 52-week range of $6.10 to $8.55 a share. The stock price has increased daily since Jan. 23, the day before it released its financial results, when it closed at $7.58.

For the first quarter, Xerox expects earnings of 19 to 21 cents a share and adjusted earnings per share of 23 to 25 cents. The company reiterated its full-year guidance of earnings per share of 94 cents to $1 and adjusted earnings per share of $1.09 to $1.15.